Asian leaders meet to discuss SARS

Goldman Sachs lowers worldwide PC unit growth forecast

SAN FRANCISCO (CBS.MW) -- Asian heads of state met in Thailand on Tuesday to come to grips with the SARS outbreak as more U.S. companies tried to assess what the disease's impact means for their own economic health.

In an unusually open approach, Chinese Premier Wen Jiabao briefed leaders from the 10-member Association of Southeast Asian Nations about its disease-fighting tactics. China has come under fire in recent weeks for covering up the extent of the illness, which first appeared there in November.

"There is a need for us to recognize the fact that the SARS epidemic is going to be a long-term, complex and relapsing epidemic," Wen said at the end of the conference. "We have already learned our lesson."

The leaders agreed to new immigration and customs control strategies to help contain the respiratory illness that has no known cure. Some nations also pledged financial support. Taiwan approved an emergency fund estimated at $1.4 billion to be used as a relief package for businesses struck most severely by the illness, according to the Kyodo news service.

The World Health Organization lifted its advisory against nonessential travel to Toronto on Tuesday after Monday declaring Vietnam the first country to contain SARS.

Asian stocks rose Tuesday on hopes that SARS had peaked in the hardest hit areas, according to the Financial Times. In Hong Kong, the benchmark Hang Seng Index closed up 309.18 points, or 3.67 percent, its highest level in three weeks. Singapore's benchmark Straits Times Index closed up 43.57 points, or 3.37 percent.

In the U.S., the Dow closed 31 points higher Tuesday after a surge in consumer confidence. See full story.

Hardware forecast downgraded

"We have lowered our 2003 worldwide PC unit growth forecast to 5 percent from 6 percent due to the negative impact of SARS on demand in Asia and ongoing weakness in the global economy," she said. "With PC growth in the low single digits and revenue growth roughly flat, market share gains are the only way that companies can make progress."

Impact on aerospace and defense

The presence of SARS isn't forcing many broad changes to earnings or stock ratings in the aerospace and defense sector, Merrill Lynch analyst Byron Callan said. The firm retains its buy rating on Boeing
BA, -0.24%

"If SARS cases peak in the next month or two, then the fears surrounding it may abate in subsequent months and there may not be material damage to 2003-2004 fundamentals of companies we cover," Callan said Monday.

Should the disease spread, its potential impact would extend beyond civil aircraft demand for airlines serving Asia, he said. "If SARS proves to be a more significant factor affecting the U.S. and other international economies, its ramifications could include far higher U.S. federal budget deficits and weaker corporate profits.

"Higher budget deficits could negatively impact outyear U.S. defense spending projections, which in turn could impact defense company earnings growth rates and valuations."

On the other hand, a growth in SARS cases may boost business jet demand for people who are leery of flying on commercial airlines, but even that scenario remains questionable, Callan said.

"While travel in a private jet might provide some margin of safety, we wonder how many people would make a trip in the first place if the virus spreads and how broader pressures on corporate profits would affect business jet demand," he said.

Despite SARS-related uncertainty, shares of Northrop Grumman
NOC, +1.20%
were on the rise Tuesday after the company's first-quarter earnings beat Wall Street's consensus estimates. The military contractor raised its full-year forecast based on its TRW acquisition. See full story.

Insurer sees SARS-related boost

American International Group warned that SARS would have a short-term impact on profits, but AIG
AIG, -0.89%
Chairman and CEO Maurice "Hank" Greenberg said the illness could produce long-term growth in its Asian life insurance business.

"It's a tragedy obviously," said Greenberg, speaking Tuesday at the UBS financial services conference. "I'd hate to say we will benefit from SARS. It remains a huge problem in China."

Government and corporate officials are increasingly concerned about economic consequences such as lower spending by crowd-averse consumers and a drop-off in travel. Singapore, which is enforcing tough anti-SARS measures, reported a 71 percent drop in visitor arrivals.

The WHO said that severe acute respiratory syndrome appears to have peaked in Singapore, Hong Kong, Vietnam and Canada, but that the number of cases in mainland China continues to grow. Travel advisories remain for Beijing, Hong Kong and Guangdong and Shanxi provinces in China.

China announced nine more deaths Tuesday while Hong Kong said another 12 of its citizens succumbed to the disease. Three new nations also joined the list of places with SARS infections -- Mongolia, South Korea and New Zealand.

Intraday Data provided by SIX Financial Information and subject to terms of use.
Historical and current end-of-day data provided by SIX Financial Information.
All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only.
Intraday data delayed at least 15 minutes or per exchange requirements.